Ethereum’s native token, Ether (ETH), returned 40% against Bitcoin (BTC) after hitting the local low at 0.049 on June 13. Now, the ETH/BTC pair is at a two-month high and may extend its rally in the coming weeks, according to a classic technical pattern.
ETH paints a cup and cavity design
Specifically, the ETH/BTC pair has been forming a “cup and handle” on their lower time-scale charts since July 18.
A cup and loop pattern is usually seen when the price drops and then rebounds in a U-shaped rally, which is similar to a “cup”. During this time, the rally leads to a pullback, where the price tends to fall inside a descending channel called a “loop”.
The pattern resolves after the price recovers to an amount almost equal to the previous decline. The ETH/BTC chart below shows a similar bullish technical setup.
In particular, the pair is now trading inside the bight range, but could continue to recover towards the neckline resistance near 0.071 BTC. Then, a decisive breakout of the bight and a cup above the neckline level could drive ETH/BTC to 0.072, up 12.75% from today’s price.
According to veteran investor Tom Bulkowski, the success rate of the cup-and-cave arrangement in reaching its profit target is 61%.
The Blending Factor
The bullish setup for the ETH/BTC pair is also inspired by the transition of the Ethereum network from proof of work (PoW) to proof of proof (PoS), possibly through the “Merge” scheduled for mid-September.
Also read: Will Ethereum Merge fever continue, or is it a bull trap?
Meanwhile, market analyst Michaël van de Poppe declares that the Merge craze could see Ether gain more upside against Bitcoin as it builds momentum in the coming weeks.
Basically a few levels on $ETH.
Resistance in front of 0.0725 $BTC.
Overall, expect more momentum heading into the merger in September. pic.twitter.com/QpmkyTwjyb
— Michael van de Poppe (@CryptoMichNL) July 23, 2022
Basically a few levels on $ETH. Facing the resistance at $0.0725BTC. Facing support at $0.0645BTC or $0.057BTC. Overall, we expect more momentum ahead of the merger in September. pic.twitter.com/QpmkyTwjyb — Michaël van de Poppe (@CryptoMichNL) July 23, 2022.
Van de Poppe expects ETH/BTC to test 0.072, the cut-and-handle profit target, as interim resistance, with the 0.0645 or 0.057 level as support.
Conversely, the range of risks for Ethereum with the Merger Update includes potential technical issues, delays, or even a controversial hard fork. For example, a bug split the Ethereum chain during a network update in 2020.
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